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October 18, 2004

Why Kerry's Great on Energy.

George W. Bush and John Kerry probably differ more on energy policy than on any major issue except abortion, yet news organizations have said barely a word about their positions. Energy policy ought to be a limelight issue this election year. Congress has not passed an energy bill in more than a decade. Oil consumption and oil imports continue to rise. Natural gas prices are high and supplies are tight. Average fuel efficiency of new cars is the lowest in 15 years. The United States continues to supplicate to Persian Gulf dictators for petroleum. And greenhouse gases from fossil-fuel use continue to accumulate.

Early in his term, Bush called energy policy his top concern: "We're in an energy crisis now," he said in March 2001. But, since September 11, 2001, energy has vanished as a White House priority, though production and consumption trends remain unchanged. Even the infamous Cheney energy plan -- the content of which is nowhere near as bad as pundits made it sound -- has been forsaken by the White House. Meanwhile, Bush has offered only token gestures toward the greatest need in energy policy: higher miles-per-gallon (MPG) standards to restrain America's ever-growing thirst for imported oil.

Kerry, by contrast, has made that need the centerpiece of his energy policy -- for years. Detractors often ask what Kerry has done in the Senate; one answer is energy policy. In 2002, Kerry joined with Senator John McCain to advocate higher fuel-economy standards for cars, pickup trucks, and SUVs. The Kerry-McCain MPG proposal was one of the big Capitol Hill events of 2002, not least because Democrats from SUV-producing states fought it furiously. That, on energy policy, Kerry showed the political courage to oppose his own party -- and the United Auto Workers -- while preparing a primary run is a sign of character that deserves notice in the presidential race.

If elected president, Kerry might be the nation's first executive since Jimmy Carter to offer meaningful reform in energy policy. Today, Carter is remembered as a well-meaning bumbler, but his energy decisions had historic impact. Carter deregulated oil and natural gas while imposing a big increase in vehicle MPG. These actions converted the oil and gas shortages of the 1970s into the surpluses of the 1980s, and cracked the Oil Producing and Exporting Countries (OPEC) "price maintenance" monopoly. One reason four consecutive presidents -- Ronald Reagan, Bush 41, Bill Clinton, and Bush 43 -- have been able to pay little attention energy policy is that Carter's decisions worked out so well.

But the time bought by Carter's energy reforms is running out. In 2003, the United States burned about 20 million barrels of petroleum each day, of which 11 million barrels, or 55 percent, were imported -- almost double 1974 levels. Rising global demand for oil, especially Chinese demand, suggests that petroleum will become ever-more expensive in real-dollar terms. Increasing U.S. imports ensure a worsening balance of trade, and increasing consumption raises fears of an artificial greenhouse effect. Maintaining the energy status quo, the central trend of which is ever-higher petroleum consumption by gas-guzzling SUVs, is a formula for constantly rising oil prices, as well as endless wars and entanglements with dictators in the Persian Gulf.

All presidential candidates since Richard Nixon, including Bush and Kerry, have promised energy independence. That goal is unrealistic. "Politicians talk about energy independence because this phrase polls extremely well, but the whole idea is nonsense," says a former White House energy adviser. But, with moderate improvements in the gas mileage of new vehicles, it is possible within a single decade to eliminate the amount of oil the United States imports from our most dangerous, and least stable, suppliers: The Persian Gulf states. Kerry is the first major presidential candidate in a generation to offer a serious plan to make this happen.

In four years, Bush has done nothing to change America's craving for Gulf oil. Bush has opposed significant strengthening of MPG standards for vehicles, continued to hold SUVs and the misnamed "light" pickups to lower MPG strictures than regular cars, continued to exempt some altogether, and enacted a tax break for those who buy the heaviest SUVs. Bush supports oil-drilling in the Arctic National Wildlife Refuge (ANWR), but, in even the best case, ANWR production will only supplant depletion of domestic oil fields in the contiguous 48 states; the reason to drill ANWR is to maintain domestic production, not to provide an alternative to Saudi oil. When the topic is oil efficiency, Bush always brings up "fuel-cell" cars that run onhydrogen. But, while it is an important research area, hydrogen has no immediate value to energy policy. It is an energy medium, like electricity, not an energy source; and, at present, there is no way to obtain hydrogen without expending substantial amounts of fossil fuels. Changing the subject to hydrogen is Bush's way of diverting attention from his inaction onvehicle MPG.

Kerry's energy proposals are dramatically different. Most important, Kerry advocates substantial improvement in the fuel efficiency of vehicles, including SUVs and pickups. Kerry would ban ANWR drilling but build a pipeline to Alaska's North Slope natural gas fields (which Bush also says he supports, but hasn't done much about), cancel the Yucca Mountain facility for atomic-reactor wastes (though he is not necessarily anti-nuclear power), mandate that 20 percent of electricity be generated from renewable sources by 2020, and invest billions more than Bush in clean-coal technology. Though Kerry rarely mentions greenhouse gases or global warming -- political consultants fear "global warming" has become code for "surrender authority to the United Nations" -- his plan would reduce U.S. carbon emissions, which are proportional to fossil fuel burned. Kerry's ideas would cause the United States to cut carbon emissions through domestic policy-making: In the Senate, he voted against the Kyoto greenhouse gas treaty. Energy policy and greenhouse reform have become the same issue, and Kerry's proposal recognizes that fact -- one of its major advantages over Bush's energy plans.

To be sure, there are problems with some of Kerry's suggestions. His opposition to the Yucca Mountain facility may be driven by the fact that no vote-seeker can campaign in Nevada unless he is anti-Yucca. But the United States must have a permanent storage place for waste from power reactors, and, at this point, the objections to Yucca Mountain are either farfetched (we can't be sure what the geology of Nevada will be in 10,000 years!) or based on scientific illiteracy. Plus, if you really believe that storing atomic waste deep underground in sturdy containers in a modern facility 100 miles from the nearest population center is too dangerous, where do you think atomic waste is being stored now? It is sitting in rusting holding ponds at nuclear reactor stations, most of which were designed in the 1950s and are located close to cities. If you're against Yucca Mountain, you're in favor of keeping atomic waste in rusting holding ponds.

Kerry's call for 20 percent of electricity to come from renewable sources by 2020 also has problems. Kerry defines renewable power as "wind, solar, geothermal, and biomass," but, together, these sources account for only about 1 percent of electric generation. Even a successful effort to develop them might only double that number to 2 percent. Because environmentalists despise dams, Kerry doesn't discuss hydropower, which today generates far more zero-emission energy than wind, solar, geothermal, and biomass combined, and which offers much more immediate potential for increased production. In particular, there are many old facilities where output would increase if 1930s-era generators were replaced with modern equipment. Yet, instead of demanding that power dams be modernized, environmental lobbies are demanding that they be taken down. It's a small disappointment that Kerry does not show the same valor in opposing anti-hydro sentiment as he does in facing MPG needs.

Finally, there are two flaws in Kerry's plan to provide $10 billion to develop so-called "clean coal" -- systems that burn coal while producing fewer greenhouse emissions. First, Washington has been sponsoring clean-coal research for years. A Bush-backed project with the incredible name Integrated Sequestration and Hydrogen Research Initiative -- just imagine it: "My fellow Americans, this administration has made our nation a leader in integrated sequestration!" -- is already building a pilot plant that will burn coal to manufacture hydrogen and be nearly greenhouse-neutral, injecting carbon by-products back into the Earth. The second problem with Kerry's clean-coal program is that there are already clean-coal systems that work, but utilities are reluctant to use them because they are so expensive. A generating process called "gasification combined-cycle combustion" is available now and offers big reductions in pollution from coal, but it costs notably more. Most likely, the board of directors of any publicly owned utility would not let the company build combined-cycle facilities, since this would violate their fiduciary responsibility to maximize returns.

Market forces alone will never cause utilities to adopt the most advanced clean-coal combustion or carbon sequestration. Government must require such technology, either directly, by imposing greenhouse limits on utilities, or indirectly, by placing a cap on carbon emissions and then allowing utilities to trade permits. This "cap and trade" approach was spectacularly successful in reducing acid rain. But Kerry's energy plan says nothing about it. Of course, neither does Bush's. Until a president stakes his credibility on binding action to put advanced coal systems into use, clean-coal talk is just pleasant political blather.

Its flaws aside, Kerry's plan is remarkable in its willingness to face the gas-mileage issue. No politician wants to be the one to say that monstrous SUVs and high-horsepower vehicles of any size are bad for national security because they entangle us in Gulf politics, bad for the greenhouse effect because they release great quantities of carbon, and bad for drivers and passengers because they increase highway fatalities. Fear of making these statements is why Reagan, Clinton, and both Bushes shunned action on fuel efficiency.

Official overall mileage of new U.S. vehicles rose from about 14 MPG in the late '70s to a peak of 22 MPG in 1987 and has since declined to 21 MPG. These figures, however, are based on unrealistic tests in which cars are accelerated gently and are never driven above the speed limit. The real-world overall mileage of new vehicles is probably 20 percent lower: a pathetic 17 MPG. As more SUVs and other guzzlers have been added to the roads, and as the number of miles the average driver logs each year has risen, oil demand has continued to grow.

A 2001 National Academy of Sciences study says that overall mileage can be improved by about one-third, using existing technology, without sacrificing safety or comfort and without forcing people into tiny, crash-vulnerable cars. But, when the Academy released its findings, Bush shelved the subject, employing the time-honored dodge of requesting further study. Kerry, in contrast, offered legislation to implement the improvement.

The Kerry-McCain proposal, introduced in March 2002, raised the federal MPG standard for new vehicles by one-third and dropped the loopholes that allow SUVs and pickups to meet lower standards than regular cars or to avoid standards entirely. Democrats from auto-making states were unhappy because, regardless of whether Detroit made a mistake in emphasizing the mammoth-vehicle market, that's the decision Detroit made, leaving new mileage rules unpopular in the Midwest. After a Senate showdown, the Kerry-McCain mileage plan lost 62-38, with 19 Democrats voting against it.

The Kerry-McCain proposal raised mileage using the existing "corporate average fuel economy" (cafe) system, which in theory requires the total number of vehicles a manufacturer sells to have a target MPG average. Economists dislike that system, and some believe it contains perverse incentives that harmed Midwest auto production. As a Massachusetts senator, Kerry didn't need to care about Midwest auto production. As a presidential candidate, he must: Thus, his new energy policy drops cafe and instead offers tax credits of up to $5,000 to anyone who buys a fuel-efficient vehicle, plus $10 billion to the Big Three to help them retool factories for production of high-MPG cars and trucks.

This new plan is less definite. Whereas Kerry once favored strong, binding MPG restrictions, he has now backtracked to an incentive-based system that may or may not work. Kerry's plan would make fuel-efficient vehicles cheaper than guzzlers and then let the market decide. But it's not implausible that consumers would be attracted to vehicles that cost $5,000 less and burn less gasoline -- and therefore that Kerry's system could inspire a market shift toward higher MPG. A simple one-third increase in the mileage of new vehicles would have a remarkably beneficial impact on the United States-Persian Gulf relationship, and quickly.

Here's the math. About 17 million new cars and "light trucks" (SUVs, pickups, and minivans) are sold in the United States each year and driven, on average, about 12,000 miles annually. If the fuel efficiency of 17 million vehicles driven 12,000 miles annually rose by one-third, from a real-world 17 MPG to a real-world 23 MPG, that would save about 200 gallons of gasoline annually per vehicle, or about 3.4 billion gallons of gasoline. Since a barrel of petroleum yields 20 gallons of gasoline, about 170 million barrels of oil would be saved.

Perhaps you think, Aha! With U.S. petroleum demand at 20 million barrels daily, this MPG initiative has saved just about one week's worth of oil. Yes -- in the first year, the MPG increase would have little effect, in much the same way that, in their first year, few investments yield much return. But remember the miracle of compounding! In the second year, with two model-years' worth of vehicles at the higher MPG, 340 million barrels of oil are saved. The next year, the savings is 510 million barrels, the next year 680 million, and so on. In just the fifth year of this initiative, we would need to purchase about 850 million fewer barrels of petroleum -- approximately the amount the United States imports each year from the Persian Gulf states. If future vehicle sales are about the same as current sales, it would only take seven to eight years for there to be more vehicles on the road with the new standards than without them. Then, a tipping point might be reached, and national petroleum consumption could actually start to decline. (Note to econ majors: Yes, this is a simplified calculation that does not include the effects higher MPG standards might have on auto markets.)

In short, eliminating U.S. dependence on Gulf-state oil is not a granola-crunching fantasy. All that's needed is a one-third MPG improvement, an extremely doable goal. Moreover, this goal is achievable within roughly a decade: Five years' notice to automakers to allow them to adjust plans and production (this avoids harm to Detroit), five years of sales of higher-MPG vehicles, and then the United States can kiss the Persian Gulf goodbye. When Kerry promises "a secure America independent of Middle East oil," he is not blowing smoke. He is setting a realistic goal that can be achieved in the near term.

Of course, if the United States stopped buying Middle East crude, the oil sheiks might simply sell to someone else, notably China. But then the sheiks would be China's problem. The United States would no longer need to offer its soldiers' blood in defense of Gulf oil fields, nor coddle corrupt Gulf dictatorships. In addition to improving U.S. national security, an end to purchases of Persian Gulf oil could improve economic security. If rising Chinese demand for oil causes a long-term rise in prices, to perhaps $75 per barrel, the U.S. economy may be severely damaged -- unless fuel efficiency reduces our need for oil.

But wouldn't higher MPG standards force people to drive econo-box death traps? No -- mileage standards could rise by one-third with hardly any outward change in cars. Godzilla-class SUVs, such as the Hummer and the Excursion, would be history, but full-sized sedans and large SUVs, such as the Ford Explorer, could still grace auto showrooms.

Consider that, from 1981 to 2003, the average horsepower of new vehicles sold in the United States rose 93 percent, average acceleration time improved 29 percent, and average weight rose 24 percent, while average MPG remained essentially unchanged. That Detroit has been able to make its products heavier, faster, and more powerful while essentially keeping mileage the same means that engine efficiency has improved significantly: It's just that improvements have gone into power, not MPG. The main changes needed for vehicles to show a big rise in MPG, yet remain full-sized and comfy, are reductions in horsepower and acceleration.

That today even family cars accelerate 29 percent faster than cars of two decades ago is a leading reason franticness has taken over U.S. roads -- almost every new car has the power to drag race from stoplights and cut others off in road-rage style. Is this a beneficial development? Certainly not for young people, whose high risk of death in traffic accidents traces partly to the increase in car acceleration. Raising vehicle fuel efficiency one-third by reducing horsepower would not only allow the United States to bid Riyadh farewell, it would make U.S. roads less dangerous and rage-stressed. Everyone would be better off.

Already, there are hints the market is shifting toward improved MPG. The Hummer is having a bad sales year, while the hardest car to get -- as measured by waiting time -- is the 40 MPG Toyota Prius sedan, which uses a "hybrid" gasoline-electric drivetrain. But, if you're wondering why Toyota is not rushing to stamp out more Priuses, it's because the company loses money on every one it sells: Manufacturers have not yet learned how to build hybrids at a profit. This, in turn, is why fuel-efficiency improvements based on established technology are the key to moderating oil demand. Someday, automakers will manufacture hybrids profitably; someday, hydrogen power and other advances will be practical. But automakers and White House officials talk futuristically about hybrids and hydrogen because it indefinitely postpones MPG reforms, implying that significant increases in fuel economy are not practical now. They are.

Last month, the California Air Resources Board mandated that, by 2016, passenger vehicles sold in California emit, onaverage, one-third less carbon. Since, with current technology, the only practical means to reduce greenhouse gases is to reduce fuel consumption, this was the same as ordering a one-third increase in MPG. Automakers are already complaining. They will file dilatory lawsuits and predict exorbitant costs. But automakers complained, filed dilatory lawsuits, and predicted exorbitant costs about seat belts, smog reduction, and air bags -- and all turned out to be feasible and affordable. For decades, California has been the leader in automobile trends: in styles and tastes, in safety and pollution control. Now California demands a one-third improvement in fuel economy. The entire country should join this initiative.

Weaning ourselves from Gulf oil or combating the greenhouse effect only seems impossible today because we have not yet tried to face these challenges. With a wise and forward-looking energy policy, we can preserve our comfortable lifestyle and protect the climate. But nothing will happen until genuine changes in energy policy are made. Western society is living in a pleasant interregnum, during which fossil energy is cheap and artificial global warming has so far done no harm. Neither condition is likely to last. John Kerry proposes to act while there is yet time; George W. Bush proposes to leave the problems for someone else.

Gregg Easterbrook is a contributing editor for The New Republic specializing in public policy issues.